May 4, 2010 by Chris.

See the below article on Neeti Arndt’s blog (our real estate broker). Now that Fannie and Freddie are no longer backing interest-only loans for 2-4 units, there could be even fewer investors in the market for these properties. This could pose an attractive investment opportunity in the near term for buyers. The only downfall with investing in less than five units is that loan is based upon the borrower’s debt to income (DTI) instead of the property’s cash flow. This is why real estate investors are always seeking people with high FICO scores and low DTI values to partner on real estate deals

Fannie Mae Tightens Guidelines On ARMs And Interest Only Products : Neeti Arndt

Posted in Financing | Print | 1 Comment »

April 16, 2010 by Chris.

This is the first article (see What is Unrelated Business Tax?) I’ve read that actually explains the background behind Unrelated Business Taxable Income (UBTI)! Unfortunately, I think this 70 year old tax now extends much further than it was intended. UBTI is a tax that must be paid, even if you’re a tax-exempt or tax-deferred (i.e. IRA) entity. In the investment world, UBTI is the resulting tax of investment profits made on leveraged assets.

CNA Capital will allow its clients to use their self-directed IRAs to invest in one of our offerings - just know that this requires extra planning. Contact us if you want more information on how to setup a self-directed IRA for yourself.

Posted in Financing | Print | 1 Comment »

January 27, 2010 by Chris.

See the HUD press release: U.S. Department of Housing and Urban Development (HUD) press release

This is great news as flippers no longer need to hold a property for 90 days before they can turn around and sell to a buyer who’s using FHA financing. Honestly, I’m not sure why HUD even had this rule to begin with! Please enlighten me…

Posted in Financing | Print | 1 Comment »

January 19, 2010 by Chris.

 While I applaud the FHA’s attempts at avoiding a taxpayer bailout, their efforts will unfortunately not work and us taxpayers will be left on the hook. Here is the details of the new FHA lending fees that in theory should help the FHA stay solvent - Federal Housing Administration to raise fees - Yahoo Finance

The primary problem with the subprime mess was/is insufficient equity on the borrowers’ part. Sure, many borrowers ended up not being able to pay the monthly mortgage payments when the teaser rate ARMs reset. But, the more interesting (i.e. scary) situation is when borrowers who can pay their monthly mortgage perform a “strategic default” and decide to just walk away instead of paying on a property that is way underwater. This is precisely what is happening right now.

Congress created the FHA in 1934 to help the housing industry recover from the Great Depression. At that time, the US consisted primarily of renters as lenders would only lend up to 50% of the value of the property. The FHA stepped in to insure mortgages that were created with a higher LTV ratio, thus enabling more people to buy property.  Today, you can get an FHA loan insured with only 3.5% down!

Therein lies the problem…what happens when the property value falls 20%? (a modest decline compared to many areas today) The borrower is now paying a mortgage that is worth 17% percent more than the property! Why not just walk away and rent for a year or two. Then go buy a new place at a cheaper price! Sure, you may have a little harder time qualifying the second time around, but with all the current foreclosure, I guarantee lenders won’t ding you as much as they used to for this being on your credit history.

My prediction - the FHA will have to be bailed out by taxpayers in the near future, even with these fee increases. Oh, did I mention that their “fees” can be rolled up into your mortgage?! Brilliant!

Posted in Financing | Print | No Comments »

July 1, 2009 by Chris.

The government is now extending this program to homeowners who’s mortgage is 125% of the value of their home! Are we trying to start this mess all over again?

Just because someone made timely payments on their mortgage for the past 12 months doesn’t mean they won’t run into financial hardship tomorrow. If that happens, the first thing they do is walk away from a home where they have negative 25% equity!

No bank would ever lend in this situation normally, so I’m guessing that the government (i.e. you and me as taxpayers) is at least partially backing these loans in case of default.

On an optimistic note, this will probably help increase the pool of cheap, foreclosed properties that CNA Capital can scoop up on the cheap - let us know if you want in on this action!

Obama extends mortgage refinancing program - Jul. 1, 2009

Posted in Financing | Print | No Comments »

June 16, 2009 by Chris.

This article includes a great illustration of hard-money loans vs rehab loans.  CNA Capital will use these types of loans (when prudent) in addition to your investment, to give you the best return on invested cash possible. Don’t worry if you don’t understand this illustration - that’s what we’re here for!

Quickly Obtain Hard Money For Rehab Loans by Synergy Equity Management - EDUCATION

Posted in Financing | Print | No Comments »

June 6, 2009 by Chris.

Most of our investment opportunities need two things: 1) cash for a down-payment and 2) credit to secure financing. Either one can get you a piece of ownership in the investment. I think the first is obvious, but the second warrants a bit of explanation:

For investment properties with four residential units or less, we can get much better financing terms (lower down-payment and better interest rate) if we use residential financing as opposed to commercial financing. However, to secure residential financing, a person must put the mortgage in their own name. To qualify, this person must not already have too high of a personal debt to income ratio (caused by auto, school, credit card, home loans). As a result of you providing credit, which saves financing costs, you a rewarded with a piece of ownership in the investment property with zero cash!

Now of course there are other considerations to be aware of, which we would be happy to explain; please contact us at info@cnacapital.com if you would be interested in this type of arrangement.

Posted in Financing | Print | No Comments »